TORONTO – After two and a half years of work at its troubled Tasiast project, Kinross Gold Corp. still has a lot to prove.

On Monday, Kinross released a long-awaited pre-feasibility study on the proposed expansion of Mauritania-based Tasiast. The company called the results “encouraging” and elected to move ahead with a full feasibility study. But analysts and investors were far from thrilled.

Put simply, the study results did not confirm that the project would generate a strong return on investment. Instead, they confirmed a lot of work still needs to be done.

The initial cost to get Tasiast up and running would be US$2.7-billion, according to the study. While the proposed mine would produce roughly 830,000 ounces of gold a year at low costs, the estimated net present value is only US$1.1-billion at a gold price of US$1,500 an ounce, while the internal rate of return (IRR) is a meagre 11%.

That is a low IRR for such a large and high-risk project, especially given that the assumed gold price is higher than the current one. At lower gold prices, analysts estimated that the numbers get significantly weaker.

“A US$2.7-billion investment to generate US$1.1-billion in West Africa is unattractive,” Stifel Nicolaus analyst George Topping wrote in a note. He believes that pressing on with a “weak” project in a rough market is not a wise move, and is “detrimental to market confidence in the company.”

On a conference call, chief executive Paul Rollinson stated repeatedly that this is only a pre-feasibility study and there are opportunities to improve the economics of the project.

One possibility is to use natural gas instead of heavy oil as an energy source, as Mauritania has vast quantities of offshore gas that have not been tapped. “At some point, this gas will come to shore,” he said.